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Demand for dishwasher water pumps is 8 per day. The std. deviation of demand is 3 per day, and the order lead time is 4 days. The service level is 95%. What should the reorder point (ROP) be? About 24 about 32 about 38 more than 40
Expert Answer
Reorder Point
= Demand /day x Lead time (in days) + safety stock
= Demand /day x Lead time (in days) + Z. Std. deviation of demand during Lead time
= 8 x 4 + 3Xz
Value of Z for service level 95% (i.e. 0.95) from standard deviation table = 1.65 (approx.)
Therefore,
Reorder point
= 8×4 +1.6×3 = 32 + 4.8 = 36.8
Therefore, answer is “c. about 38”
